HC reiterates Section 164 and 167 of the Companies Act, 2013 not applicable retrospectively [Read Judgment]

The Delhi HC in, MUKUL MITTAL & ANR v. UNION OF INDIA THROUGH ITS SECRETARY & ANR.  reiterated the findings in  Mukut Pathak and Ors. Vs. Union of India and Ors.,  which stated that any Company or Directors committing defaults under Section 164(1) of the Act before 07.05.2018 cannot invite application of the proviso to Section 167(1)(a) of the Act.

Facts

Agarwal Bandhu Infra Developers Private Limited was incorporated as a company in 2008 and the petitioners were its directors. Till 2013 statutory returns were filed by the company but later they failed to do so and as a result, their name was struck down from list of companies in 2017, petitioners were disqualified as directors and subsequently their Director Identification Numbers (DINs) and Digital Signature Certificates (DSCs) were canceled. However, In 2019 NCLT restored the company upon a condition that they should pay the dues. On 30.03.2020 Companies fresh start scheme (CFSS) was started which aimed to provide an opportunity to defaulting companies to file their documents at a belated stage, by condoning the delay insofar as it concerns any liability to pay an additional fee for the delay in filing. Since DINs and DSCs stand canceled the petitioners are not able to avail the scheme.

Petitioners Contention

The sole condition for the restoration of the company by NCLT was the payment of dues. But since the DINs and DSCs stand canceled neither can they pay the dues nor can they avail the benefits under CFSS. The petitioner submitted that retrospective application of 164(1) of the Companies Act was already held illegal in Mukul Pathak Case and therefore cancellation of DINs and DSCs can not hold ground.

Respondents Contention

The Respondents contended that since the petitioners have not been able to pay their statutory dues, the court should not grant relief to the petitioners.

The respondents have urged the court to await the outcome of the Letters Patent Appeal preferred by the respondents against the decision in Mukut Pathak.

Court's order

The court accepted the application of Mukut Pathak in this case and reiterated, "This implies that the ratio of the decision in Mukut Pathak (supra) is squarely applicable to the facts of this case since it specifically clarifies that any Company or Directors committing defaults under Section 164(1) of the Act before 07.05.2018 cannot invite application of the proviso to Section 167(1)(a) of the Act and a necessary corollary thereof is that their DINs and the DSCs cannot be canceled either."

To the contention of respondents regarding the appeal of the said judgment, the court said that since no stay has been put by the court on the decision hence the ratio of that very judgment shall follow and the petitioners can avail benefits under the scheme. Also since the date for filing for benefit had crossed, the court directed the respondents to allow petitioners to apply for the same.

Case Details

Case- W.P.(C) 4310/2020 & CM APPL.15510/2020

Counsel for petitioner-Mr.Sunil Kumar Tiwari with

Mr.Sudhir Kumar Gambhir, Advs.

Counsel for respondent-Mr.Awadhesh Kumar Singh, Adv.

Coram- HON'BLE MS. JUSTICE REKHA PALLI

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